Financial markets displayed a subdued tone Tuesday as trading resumed following the Presidents Day holiday weekend, with market-moving developments notably scarce compared to the active pace seen throughout 2024 so far.
Stock index futures showed modest declines before the opening bell, as traders remained cautious following last week’s dramatic fluctuations in artificial intelligence-related technology stocks that sent various sectors on a roller coaster ride.
However, underlying investor confidence remains remarkably strong. Bank of America’s latest monthly survey of global fund managers released in February indicates market participants maintain what analysts describe as “uber-bullish” expectations for both economic growth and corporate profits this year. The survey did highlight ongoing concerns about potential excessive investment in AI infrastructure as a warning sign.
International markets showed little movement, with Asian trading particularly quiet due to holiday-reduced activity. Japan’s Nikkei index declined following disappointing economic data released Monday, which revealed the country’s economy expanded at just a 0.2% annualized rate during the fourth quarter – significantly below economists’ projections of 1.6% growth.
The weak Japanese economic performance initially pressured the yen, which dropped 0.4% versus the dollar Monday after gaining nearly 3% the previous week. However, the currency recovered those losses by Tuesday’s trading session.
Tuesday’s U.S. economic calendar features limited data releases, including the Federal Reserve Bank of New York’s manufacturing survey and the National Association of Home Builders Housing Index. Treasury bonds continued benefiting from Friday’s encouraging consumer price inflation report, which showed relatively modest price pressures.
Investors will receive additional insight into Federal Reserve policy direction later this week through Wednesday’s release of meeting minutes from the Federal Open Market Committee and Friday’s fourth-quarter gross domestic product figures. Inflation data from Canada, the United Kingdom, and Japan will provide broader context for global economic conditions.
British unemployment climbed to 5.2%, marking the highest level in more than a decade excluding pandemic-related spikes. This development has fueled expectations for another Bank of England interest rate reduction next month, with financial markets pricing in an 80% probability of such a move.
The British pound weakened against both the euro and dollar, while the FTSE 100 stock index advanced. Two-year government bond yields in the UK fell to their lowest levels in 18 months.
Geopolitical developments provided a backdrop to Tuesday’s quiet trading environment as nuclear negotiations between the United States and Iran resumed in Geneva. Oil and gold prices edged slightly lower as the diplomatic discussions began. Former President Trump stated Monday that he believes Iran is interested in reaching an agreement.
Retail giant Walmart, scheduled to report quarterly earnings this week, achieved membership in the exclusive trillion-dollar market valuation club this year, becoming the world’s 12th most valuable publicly traded company.
Key events for Tuesday include the New York Fed business surveys at 8:30 AM and the housing market index at 10:00 AM. Federal Reserve Governor Michael Barr and San Francisco Fed President Mary Daly are both scheduled to speak. Corporate earnings reports are expected from medical device maker Medtronic and cybersecurity firm Palo Alto Networks.
